Press Conference after the Meeting of the Government, Held on Wednesday 26th March 2008

Jana Bartošová, government spokesperson: Good afternoon, ladies and gentlemen, welcome to the press conference after the meeting of the government. Let me welcome the Prime Minister, Mr. Mirek Topolánek, the Minister for Human Rights and National Minorities, Mrs. Džamila Stehlíková, the Deputy Prime Minister and the Minister of Labour and Social Affairs, Mr. Petr Nečas, the Minister of Finance, Mr. Miroslav Kalousek, and the 1t Deputy Minister of Health, Mr. Marek Šnajdr. I ask the Prime Minister for his introductory speech.

Mirek Topolánek, Prime Minister of the Czech Republic: We are in rather larger composition here today. The Minister of Finance, except for specification of leaked materials, will present here what we will debating in the future weeks. I have good news for you – the Deputy Prime Minister Nečas will certainly want to speak about the deputies´ proposal and to inform you on a better solution of the government and for the same reason the Deputy Minister Šnajdr is present. The Minister Mrs. Džamila Stehlíková had four relatively important items on the agenda today; therefore she is at the press conference as well. We debated number of issues which concerned the Ministry of Agriculture – various draft government decrees concerning subsidies and such like. Just for your information, I charged the Minister of Agriculture with a task to make analyses of all the subsidies, whether they were given to primary production or to rural development. We are drawing 100% of money especially from the European Commission; nevertheless we ourselves would like to know what subsidies are given to this sphere. That was information beyond the framework of the debate. After rather long discussion, we approved the Draft Government Order on the Integrated Pollutant Emission Register. There were rather long discussion about this issue; nevertheless, we finally approved that material. We debated those proposals of deputies which concerned the reform of research and development. I will give information on it later on. We approved construction and funding of the Moravian-Silesian Science Library. I think that the fact that we postponed the proposal of the budget of the Czech TV on use of revenue resulted from advertising deserves your attention. The main reason was rather the structure and use of that revenue in the sphere which did not directly related to the implementation of the digital public-service multiplex, or the Cinematography Fund – there was not problem in this sphere. The problem consisted in costs for administration of those financial means and certain problem connected with the use of so called people-meters, which are administered by the Czech TV, and we do not think it should be paid using financial means obtained from higher volume of advertisements. I say frankly that the government is not willing to fund these matters. We approved the Report on Activities of the National Coordination Group for Digital Broadcasting. I am of the opinion that what is really crucial is the technical plan of transfer, in spite of the fact that it is not directly connected with the report. Based in his request, we approved the resignation of the Chairman of the Czech Mining Authority, Mr. Makarius, because of age reason and we appointed the new Chairman of the Czech Mining Authority, Mr. Pigřimek. We approved authorization of the Ministry of Interior to sign the framework agreement for the operator of the public administration of the company of Microsoft. Thus some 500-700 million crowns will be saved for granting the individual licences; right of the individual ministries to sign their own agreements will not be restricted. A maximum price was set which would result in those savings. I think I mentioned all the issues which were debated and now I will give you brief information on the issue which is under my competence, and which was crucial for me as the Chairman of the Council of the Government for Research and Development – it was the Draft Reform of the Research, Development and Innovation System in the Czech Republic. I should say that the material was approved and we could proceed to the implementation phase of all those legislative and executive steps, which form part of that reform. The reform is necessary and all cabinets before this one had been trying to enforce something like that since 1992, but it always was material for the next cabinet. No cabinet succeeded in implementation of the individual steps, including the previous cabinet which had a special Deputy Prime Minister for this issue – Mr. Martin Jahn. The fact that the reform is necessary is proved by all the analyses and all experts who are involved in that sphere agree with it. I should say that a consensus has been seeking among providers, such as the Czech Academy of Sciences, various research institutions, universities, and among those who would use the research; I means companies. The objective was to include it in the White Book of the Tertiary Education which should accompany that reform of the research, development and innovation. Finally the Council of the Government for Research and Development reached a consensus and the government, after certain discussion, accepted the fact that the process of budgetary headings, from which financial mean would be drawing, was not finished yet, because we were of the opinion that reduction from 22 to 11 was not enough. The objective is to have five budgetary headings, and the newly established Technological Agency for Specific Research - a grant agency, through which the basic research would be funded, is among them. Further budgetary headings will have the Ministry of Education, as the ministry responsible for research and development, the Academy of Sciences of the Czech Republic, and I have forgotten the name of the last institution. It is a step in the right direction and this material should make co-funding of the specific research by the industry sector possible. It means that one of objectives is cooperation of the private sector with the public research. This material has been awaiting and I am please that the government supported it. Now, I would proceed from the left to the right, and therefore Miroslav Kalousek has the floor.

Miroslav Kalousek, Minister of Finance: Thank you for the floor, Mr. Prime Minister. I am not sure of I have good news, because the media hunger especially for bad news; nevertheless, allow me to inform you of the fact that the Ministry of Finance received the arbitration judgement concerning the arbitral proceedings between the Czech Republic and Arcellor Mittal, which was held at the arbitrary court in Paris; the company of Arcellor Mittal demanded the Czech Republic to pay 5,79 billion crowns for those 14% of shares which were also subject of our lawsuit against the company of Petrcíle. All claims of Arcellor Mittal were dismissed by the arbitration and the Czech Republic will be given costs of legal representation, which amounted to half a million euros. I would remind you my information given to you about two months ago. I informed you of the judgement of the arbitral proceedings with the company of Petrcíle. The company caused the lawsuit with the Czech Republic concerning the same block of shares – 14% of the company of Arcellor Mittal – it demanded the same amount of 5,79 billion crowns and was also unsuccessful. Only a duty was assigned to us to sell the company of Petrcíle those shares for about 850 million crowns. I remind you that we were bound by the contract to sell these shares Arcellor Mittal for 57 million crowns. There was a difference – 850 million crowns, which is our duty and the payment is being realized now, and in case we did not condemned to pay it, we would have to sell shares Arcellor Mittal for only 57 million crowns. But we cannot do it as we must sell it Petrcíle for 850 million crowns. Thus the lawsuit is definitely finished and I can say that the real threat of necessity to pay 11,6 billion crowns is averted, and it is clear now that the Czech Republic need not pay a single crown. I am looking forward to reading yesterday's newspapers and learning about further defeat. I would like to say that it is an extraordinary success of the concentrated efforts of the Ministry of Finance together in cooperation with the Ministry of Justice, and I can just repeat the sentence, which I already said two months ago, that times when the state budget was a passive prey of arbitrary actions finished with the Topolánek's government. We will defend the state finances with the same doggedness with the same invention as those who have their sights on them in arbitrary actions. The press release will be published after this press conference. Allow me to briefly inform you that I submitted a draft material which, as it happens, leaked to the media a bit earlier. By means of this material, we are preparing a solution, to which we are bound by the coalition agreement of the last year. Let me remind you that income tax of natural persons at the amount of 15% was in the proposal for stabilization of public budgets, including relevant tax abatements for tax payers and children. The motion modifying the original wording was adopted in the Chamber of Deputies and it decreased the tax to 12,5% starting from 1st January 2009. In spite of the fact that this transition 2008/2009 meant a shortfall in the state budget at the amount of 10 billion crowns, tax payers would have to pay higher taxes in 2009 in comparison with 2008. The coalition agreement binds us to solve that disproportion so that tax payers would not pay higher taxes in 2009 than they paid in 2008. There are number of possibilities how to solve it; some of them are advantageous, some of them are not. I informed the government on two variants. First, to solve it by social insurance decrease of employees, not by income tax decrease; it would have certain advantages and disadvantages. Second, to solve it by tax decrease and to respect that 12,5 tax rate, which also have certain advantages and disadvantages. On the web-sites of the Ministry of Finance there is this material published, including graphs, tables and detailed calculations; I am drawing your attention to it. I would like to emphasize that they are model variant; number of different variants may lead to a solution, and there is wide space here for searching a political compromise. I am prepared to respect a political agreement, political compromise; nevertheless, one principle must be respected – revenue decrease must be compensated by the same saving on the expenditure side of the budget; the solution which will be reached must not result in the deficit increase and in breaching the convergence trajectory. The search of that solution will be difficult as there are number of real medium-term risks on the expenditure side connected with the change of economic situation and in particular with inflation. It means that, for example, higher valorisation of pensions will take place in comparison with the last year. Extraordinary and very difficult negotiations on salaries of state employees and teachers await us. Therefore, also in this case the space for reaching an agreement is reduced; nevertheless I am prepared to reach it and I repeat that it is the opinion of the entire cabinet. The solution, whatever will be like, must not lead to the deficit increase. It means that our courage on revenue side must be accompanied by the same courage on the expenditure side, and thus, we will have to decide on expenditure cuts in the individual headings of the state budget. That was my information. I will answer your questions with pleasure.

Mirek Topolánek, Prime Minister of the Czech Republic: I just add that I support the attitude of the Minister of Finance. Now, Petr Nečas has the floor.

Petr Nečas, Deputy Prime Minister and Minister of Labour and Social Affairs: Good afternoon, ladies and gentlemen, the government debated today the proposal of deputies of Social Democratic Party and the Communist Party for payment of one-off amount of 6000 crowns to pensioners. The amount was to be paid out in June 2008. In the explanatory report there was stated that this measure would cost 12,5 billion crowns. I would like to emphasize, and everybody can calculate it, that if we take into consideration the fact that there are 2775000 pensioners in the Czech Republic, then by simple multiplication we would learn that real expenditures, including administration costs would be about 17 billion crowns. It means that the amount stated was lower by 4,5 billion crowns. That was the first reason why the government was not able to accept that proposal. The second reason was that following that measure, the balance of the pension system would be passive by 10 billion crowns, the deficit would take place and the state of public finances would be worsened. Moreover, this amount would not substitute the statutory valorisation which must be done based on the evaluation of the price development between August 2007 and July 2008. The valorisation will come into force starting from 1st January 2009. It means that this valorisation would have to be done anyway. In other words, there would be two valorisation of the pension system – the first one through this one-off contribution and the second one through the statutory valorisation. The total expenditures would reach the amount of 25 billion crowns and it would result in devastation of the pension system. That is why this proposal is hardly to be acceptable from the point of view of public finances. The second reason is that payment of that amount in June 2008 is an absolute chimera. The administrator of that payment – the Czech Social Security Administration need two months at a minimum for preparation of such a measure, as it would need to completely newly programme computer systems for calculation of that amount, it would need to administer the system and to conclude contracts with external partners, for example with the Czech Post. Moreover, it would be necessary to create evidentiary and accounting files, and to have them prepared by June 2008. In other words, it is quite an unfeasible law. It would have to be passed several weeks ago to be theoretically feasible. The real reasons of the refusal are those huge expenditures which would lead to the pension system devastation, to its huge indebtedness which would exceed 15 billion crowns, as the total costs would exceed 25 billion crowns. That is why the correct proposal is that of 10th March 2008. It concerned the permanent pension increase through the change of the valorisation condition for an extraordinary valorisation; the valorisation condition will be reduced from 10% to 5% and the price development between August 2007 and July 2008 will be taken into consideration. Thus, starting from August pensions will increase by 465 crowns. Starting from 1st January 2009 the regular valorisation will take place which will be based on the government order of September 2008; this valorisation will reflect the price development between February and August of this year. It means that the proposal of deputies was not systematic, and it would mean great attack against public finances and the balance of the pension system. Its implementation would cause deep deficit of the system. Therefore, I am convinced it will not win support in the Chamber of Deputies. I would also like to inform you that the government approved the Analysis of the Current State of Institutional Provision of Care for Children in Ganger, which was task that had been assigned to the Ministry of Labour and Social Affairs based on a material of the Ministry of Interior. Perhaps you remember that the ministry highlighted in September of the last year the significantly high criminality rate of young people who comes from facilities from children in comparison with children who were brought up in families or in substitute families. Based on this analysis, the government decided to establish an inter-ministerial coordination working group, which would be involved in solving these problems, so that the Ministry of Labour and Social Affairs, or rather its minister would be able to submit proposal for transformation measures and for unification of the system of care for children in danger. The existing system cannot be preserved. The government, respecting the Programme Declaration, wants to reform the system of care form children and families in danger, so that the system would serve for the benefit of those children and so that it support their return to natural families.

Jana Bartošová, government spokesperson: I thank the Deputy Prime Minister and now the Minister Džamila Stehlíková has the floor.

Džamila Stehlíková, Minister for Human Rights and National Minorities: Thank you. The government approved today the Initiative of the Czech Human Rights Government Council for Legislation Concerning Restrictive Measures as Part of the Healthcare Provision. When providing the healthcare, it is sometimes necessary to use measures restricting movement of patients. They are in particular mechanical means, e.g. straitjackets or isolation rooms or net beds. Restriction of patient movement means encroachment into personal freedom, and from this point of view and according to the Charter of Fundamental Rights and Freedoms, it is necessary to regulate these measures by the law. There is no legislation for these measures in the Czech Republic for the present; legislation is just for social services provision, not for healthcare services. Therefore, the government adopted the initiative, according to which the Minister of Health would include corresponding conditions for use of restricting measures into the law. I would like to point out that appeasement of a patient using verbal means and non-contact means should be preferred in case of the first contact with a distraught person. Only then hands can be used and finally also restrictive measures. They may be used based on the approval of a physician and detailed documentation should be procured and stored. Further material which was debated by the government was the Analysis of financing of non-state non-profit organisations from selected public budgets in 2006, which are funded both from the state budget and from the budget of the VÚSC. I can state that about 2,5 billion crowns was funded from the state budget, and from the budget of regions less than 2 billion crowns. The highest amounts were allocated to the sphere of recreation, culture, sport and social services provision. Further materials will be submitted to the government and the analysis of use and effectiveness of those means will be deepened. An important item of the agenda was upgrade of the existing National Development Programme of Mobility for All, which ensures easy access to public authorities in municipalities of the Czech Republic using financial means of the state budget. The government approved a new, modified system of funding, more effective system, and it also extended spheres of support provision to indoor adaptations of buildings, especially adaptations of town halls, lifts, sanitations, which was very important for citizens with disabilities. Thank you for your attention.

Jana Bartošová, government spokesperson: I thank the Minister and now the 1st Deputy Minister of Health, Mr. Marek Šnajdr has the floor.

Marek Šnajdr, 1st Deputy Minister of Health: Good afternoon. The government also debated the initiative of several deputies of the Social Democratic Party which concerned the amendment of the Act on Public Health Insurance. Authors tried to solve problems connecting with inheritance or sale of medical practices. Based on the expert opinion of the Ministry of Health and the Legislative Council of the Government, the government decided not to approve this proposal. That disapproval is a result of the fact that the proposal was rather a marketing trick, because it would not result in a real transfer of rights. I will try to explain it to you. Licence for medical practice does not result from a contract with a health insurance company, but from the registration according the Act on Non-State Health Care Facilities; to be concrete, it is the Act no. 160/1992 Coll.. This registration is bound to a person according to the existing legislation. It means that death, sale, transfer or a change to a different person result in cancellation of that registration. The contract with a health insurance company is bound to the registration; it means that in case of suggested change of the law, the medical practice would be cancelled and the legal amendment would not be enforceable. Further reason of disapproval of the government was the fact that a complex amendment of the Ministry of Health to the existing laws had been in the proper legislative process, through which not only sale and inheritance, but also suspension of practice would be solved in both those pillars – on the level of registration and o the level of health insurance. We suppose it to come into force as of 1st January 2009.

Jana Bartošová, government spokesperson: I thank the Deputy Minister of Health and now I ask for your questions first of all those related to the agenda of the meeting of the government.

Czech TV: The first question is to the Prime Minister and it concerns the science and research. Lots of scientists blame the reform for reduction of number of those channels from 22 to a lower number. They are afraid of decreasing quality of the decision-making process and losing their funds. What is your opinion?

Mirek Topolánek, Prime Minister of the Czech Republic: Well, I would not like it to be concerned the quality of a decision-making process, but the quality of the research. It was shown that seven billion crowns at a minimum, according to analyses, which are spent for the applied research from the state budget, were spent without results. It is possible to successfully doubt also the basic research from the point of view of citations, and therefore we reduced number of spheres which are considered from the point of view of citations as a successful basic research. We will continue in that reduction. Some countries choose for the individual spheres only world-class journals, not ministerial bulletins, as it was common in the past. That is one matter. The second matter is that we do not do the research purposefully, and it is an opinion of those who understand problems of research. Result of the research should be transferred either to an innovation cycle or to an application, or they can be used for patent protection. We are very unsuccessful country from the point of view of spent funds. In this sense, we do not want to support an average; on the contrary we want to support centres of excellence. The reduction of those providers who decide on funding of research is just on a halfway as our objective must be further reduction. An ideal variant would be that which is used in successful countries, for example in Great Britain or in Ireland, where there is the only one institution which provides effectively means from the state budget. It means that the opposite is true. The fact that we will draw about 100 billion crowns from structural funds, that we want to motivate also the specific research, it just contribute to the necessity of a change, because number of those 15 application measures which result from the reform concern also the cooperation of the private and public sector in this sphere, and it also concerns the linkage to the tertiary sector, I mean the White Book.; therefore this matter i communicated also with the Ministry of Education. I say that the opposite is true and if there are fears, then they are results of disturbance of those standard "money-pipelines", which had been established but which did not show provable results.

Czech TV: The second question is to the Prime Minister and the Minister Nečas. You refused 6000 crowns for pensioners. What is your opinion – can be the true reason of it the fight before the regional elections? It was the Social Democratic Party which submitted it.

Mirek Topolánek, Prime Minister of the Czech Republic: Well, it is not only my personal speculation; it is also well-founded speculation of the media. We are trying to do something for pensioners as they are the only one group for which the standard valorisation schemes are not abolished; their pensions are regularly valorised. What we propose and what Minister Nečas said a minute ago is to shorten the time period for evaluation. A decision on valorisation will be made earlier. We offer a standard solution within the existing legislation. Those about 465 crowns in August are results of exogenous influences, inflation increase, increase of food and energy prices which had influence not only on the Czech economy but also on the entire Europe. We respond to it and we want to push through this proposal in the Chamber of Deputies, so that we could respond to the immediate inflation development – that is why the extraordinary session is held on 1st April, and thus the pension increase could come into force as of August. of this year. The standard valorisation will be as of 1st January 200; it is given by the law and I do not know the amount now, as the inflation development is not clear nowadays. It means that we are in favour of standard legal means, not for a step, which would devastate the entire pension account, and which is completely non-standard.

Petr Nečas, Deputy Prime Minister and Minister of Labour and Social Affairs: I would lie to add that the proposal which we submit means permanent pension increase, not a single allowance. It is able to finance it from the pension system and it is a systemic solution, which will enable any government in the future to carry out an extraordinary valorisation in case the parameter of the price development of 5% is met. In other words, we offer a systemic solution, not a single non-systemic allowance, which would not be feasible and which would lead to the devastation of the pension system from the financial point of view.

Czech TV: The last question to Minister Nečas – according to data of the Czech Statistical Office the inflation in case of pensioners have increased by 9,8%. You propose the increase by 5,1%. Do you think the increase will cover the inflation?

Petr Nečas, Deputy Prime Minister and Minister of Labour and Social Affairs: First of all, I should say that you are comparing, and I do not want to offend you, rather because of lack if information, apples with pears. First, the development of 9,8% means February 2008 in comparison with February 2007, while valorisation of pensions is always evaluated from August of the previous year to July of the following year. The price development between January or February of the last year and August of 2007 has been taken into consideration in that valorisation which was carried out starting from 1st January 2008. In other words, you should deduct this from those 9,8%, because it was valorised as of 1st January 2008. Now, we must take into consideration only the inflation development from August 2007 to the present time; it is 5,1% as of 1st January and this is the amount the valorisation. The time period from January to August 2008 will be taken into consideration in the following valorisation as of 1st January of the next year.

Jana Bartošová, government spokesperson: Thank you, further question, please. The Czech TV.

Andrea Máslová, Czech TV: Mr. Prime Minister, do you consider carrying out an independent report on possible health risks of the radar in Brdy region?

Mirek Topolánek, Prime Minister of the Czech Republic: I do not know any more independent body that that which was carrying out the last report. I do not think it is the main reason of those protests. That independent report is independent enough for me. I do not know any more independent organs than those which were carrying out that report.

Petr Nečas, Deputy Prime Minister and Minister of Labour and Social Affairs: There is no more competent institution in this country for assessment of health risks that the National Institute of Public Health. I do not know any other institution which would have relevant experts, equipment, methodology and experience.

Mirek Topolánek, Prime Minister of the Czech Republic: Do you now such an institution?

Andrea Máslová, Czech TV: Certainly not. I am not the Prime Minister.

Mirek Topolánek, Prime Minister of the Czech Republic: So, you do not know any. Therefore it is not necessary to make any further analyses in this sphere.

Andrea Máslová, Czech TV: Well, how are you going to respond to that criticism which occurred, criticism of experts, for example from the technical university in Brno?

Mirek Topolánek, Prime Minister of the Czech Republic: I do not regard them as experts and it is necessary to check their basis and their background.

Andrea Máslová, Czech TV: Thank you.

Jana Bartošová, government spokesperson: Are there any further questions? Thank you for your attention and good-bye.